The ATOM AotM for July 2017 reminds us of the true core principles of the ATOM. Whenever anything becomes too expensive relative to value provided, particularly if done so through artificial government intervention in markets, a technological solution invariably replaces the expensive incumbent.

Taxi medallions, particularly in New York City, are just the crudest form of city government corruption. Drunk with its own greed, the city ratcheted up the price of taxi medallions from $200,000 in 2003 to $1M in 2013, which is far faster than even the S&P500, let alone inflation. Note how there was no decline at all during the 2008-09 recession. This predatory extraction from consumers, much like high oil prices artificially engineered by OPEC, created a market window that might otherwise have not existed until several years later. This induced the ATOM to address this imbalance sooner than it otherwise might have. and gritty entrepreneurs swiftly founded companies like Uber and Lyft, which provided a dramatically better value for money. As a result, the price of taxi medallions in NYC fell by 80% from the inflated peak. The ATOM was at a sufficiently advanced level for the technological response to be as rapid as it was (unlike with, say, expensive oil in the 1973-81 period, when there was almost no ATOM of macroeconomic significance).

Remember that the reduction in cost for a certain ride and demolition of a seemingly intractable government graft obstacle is just the first of several ATOM effects. The second is the security of each driver and passenger being identified before the ride. The third is the volume of data that these millions of rides generate (data being one of the two core fuels of Artificial Intelligence). The fourth is the ability to dynamically adjust to demand spikes (the surge pricing that the economically illiterate malign). The fifth is the possibility of new service capabilities altogether. Recall this excerpt from Chapter 11 of the ATOM :

Automobile commuters with good jobs but lengthy commutes have joined Uber-type platforms to take a rider along with them on the commute they have to undertake anyway. The driver earns an extra $200-$400/week (against which an appropriate portion of car and smartphone costs can be applied as deductions) with no incremental input time or cost. Meanwhile, other commuters enjoy having one less car on the road for each such dynamically generated carpooling pair. The key is that a dead commute is now monetized even by corporate-class people, increasing passengers per car and reducing traffic congestion, while replacing dedicated taxicabs. For the macroeconomy, it also creates new VM where none existed before.

The creation of an entirely new sub-economy, with entirely new velocity-of-money (VM), is where new real wealth creation is the purest. This effect of these ride-sharing platforms is still in its infancy. When autonomous vehicles replace human drivers, the loss of driver income is matched (indeed exceeded in post-tax terms) by savings to passengers.

It does not matter which company ultimately wins (Uber is having some PR problems lately), but rather that the disruption is already irreversible and woven into the fabric of the ATOM and broader society. Maybe Uber and Lyft will just be to transportation services what Data General and Commodore were to computing. The point is, this is a superb example of how the ATOM works, and how the transformation is often multi-layered.